By Andria Cheng

The Austin-based company reported disappointing fiscal second-quarter profit and sales and cut its full-year outlook for a third straight quarter. Same-store sales rose 4.5%, the smallest increase in at least 13 quarters and missed consensus estimate of a 5.2% gain.

“We were overly optimistic in our ability to compare against the record-breaking results we have produced for the last few years, particularly in light of the rapidly changing competitive landscape and our ongoing strategy around value,” Co-Chief Executive John Mackey told analysts. “We are upping our game.”

But the company is facing plenty of skeptics amid stiffening competition and its own poor track record of delivering on its forecasts. Cantor Fitzgerald analyst Ajay Jain, who cut the rating on the stock to sell, noted that the second-quarter report is the sixth time in the last seven quarters in which the upscale grocer’s forecast or results have missed significantly.

Mackey repeated that company’s price message will focus on “value,” including lowering prices and narrowing the gap with rivals on perishable items. The price per item sold increased on average 1.7% last quarter over a year earlier, the slowest pace in three years. In the third quarter of last year, by comparison, the average price was 3.3% higher than the previous year.

In the wake of the earnings report, at least four analysts downgraded the stock. Even those who keep their buy rating raised similar concerns.

“The new outlook was a sobering reminder of how competitive the niche grocery space is today,” said Sterne Agee analyst Charles Grom, who cut his rating on the stock to neutral. One of his key concerns: Whole Foods will have to get its “price message very loud,” which translates to spending more on marketing, which in turn could further hurt profit.

Natural-food grocers account for 4% of all U.S. supermarkets, Deutsche Bank analyst Karen Short said. However, these formats are growing at about a 15% rate.

“The disconnect is leading to excess capacity in the near term — or ‘temporary saturation,” said Short, who lowered Whole Foods to a hold. “Until this situation shakes out through consolidation, store closures and market exits, all participants in the space may feel some pain.”

Yet competition could intensify first. Mackey told analysts Whole Foods aims to more than double sales over the next five years, to $25 billion from $11 billion. He said the company also will accelerate its store openings plans to expand to over 500 stores in 2017 from close to 400 at the end of the year. Long term, he sees Whole Foods has the potential to operate 1,200 stores in the U.S.

A price war doesn’t bode well for Whole Foods’ smaller rivals, whose shares tumbled on Wednesday.

“We’ve likely underestimated the nature of the accelerating competitive environment,” said BMO analyst Kelly Bania, who lowered the rating on Whole Foods to market perform.

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About Behind the Storefront

Behind the Storefront is a blog about all things retail. It’s aimed at investors, shoppers and anyone else with a passion for learning about what drives consumer behavior. Hosted by Andria Cheng, Behind the Storefront will cover the business, brands and shopping behavior that’s behind some of the biggest companies, and largest employers, in the world. You can reach Andria at Acheng@marketwatch.com.